Answered: Bandar Industries Berhad of Malaysia…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter2: The Domestic And International Financial Marketplace

Section: Chapter Questions

Problem 11P

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Question

Bandar Industries Berhad of Malaysia manufactures sporting equipment. One of the company's products, a football helmet for the North American market, requires a special plastic. During the quarter ending 30 June, the company manufactured 35,000 helmets, using 32,000 kilograms of plastic in the process. The plastic cost the company RM 208,000. (The currency in Malaysia is the ringgit, which is denoted here by RM.)

According to the standard cost card, each helmet should require 0.8 kilograms of plastic, at a cost of RM 7.3 per kilogram.

	Required:
1.	a.	What cost for plastic should have been incurred in the manufacture of the 35,000 helmets?

	b.	How much greater or less is this than the cost that was incurred?

2.		Break down the difference computed above in terms of a materials price variance and a materials quantity variance.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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